County of Humboldt Planning and Building D E Partment

The handling oflarge sums ofcash used by applicants to conduct transactions with the Planning and Building Department lacks transparency and creates the perception ofpotential for fraud. (R-2, 3, 4) Disagree. The Planning and Building Department accepts cash payments across all budget units ofthe department. Cash is not unique to cannabis permitting. The Planning and Building Department has taken all appropriate measures to ensure that cash is handled accurately and efficiently by providing an accurate separation ofresponsibilities which is verified prior to deposits being made to the bank and the Accela Permitting system identifies how payments are made (cash, check or credit card.) When a cash transaction is made, two employees work with the customer to count the cash using a cash counting machine. For large amounts of cash this process happens in an office away from the front counter with the customer and two staff members. The cash counting machine counts pieces, denominations, and provides counterfeit detection. The employees responsible for the Planning and Building Response to 2020 Grand Jury Pages initial cash transaction place all cash in bags that are sealed and placed into a safe until the deposit is prepared. The safe is located out ofview ofthe lobby and customers. The employees who make the initial cash count with the customer do not have access to the safe. Access to the safe combination is limited to five senior department employees. When deposits are prepared, cash is counted a second time by an employee who does not have access to the safe and did not prepare the receipt. This is a point at which the work ofprior cash handlers is not only verified, but there is accountability that no cash is missing. The deposits are reconciled to the receipts and reported to the Auditor-Controller. Deposits are then submitted directly to the bank. Humboldt County currently utilizes the services of US Bank and a branch of this bank is located two blocks from the Planning and Building Department office. Deposits are transported to the bank using a wide variety of county or personal vehicles and transportation routes vary. Deposits are not transported to the bank using bags or envelopes that easily identify the contents as a bank deposit. Cash receipts are not new to the Planning and Building Department, cash receipts are not unique to cannabis, and large sums ofmoney taken in are not always cash transactions. Once any payment is received and receipted in the Department, it is documented and deposited in approved and monitored accounts. This information is provided to the Auditor Controller's office on forms provided by the Auditor's office. The deposit slips themselves do not indicate the amount of cash. The recent implementation of the Accela permitting software adds another degree of accountability. When opening a file and/or accepting a payment, the program requires recordation ofthe type ofpayment received (cash, check or credit card.) the system also identifies who received the payment. This record cannot be modified or deleted from the system so there is always an accurate record ofhow much cash was received and by who.

Cash transactions jeopardize the safety ofthe public and department personnel due to a lack ofrobust security infrastructure. (R-2, 3, 4) Disagree. During the initial rush to submit cannabis applications in advance ofthe December 2016 deadline mentioned earlier, the Planning and Building Department employed armed security guards to remain present during all business hours and accompany staff members taking deposits to the bank. During this time, the Planning and Building Department did see a large influx of cash transactions. Deposits were often made more than once daily to avoid maintaining cash in the Department safe. Since December of2016, the Planning and Building Department has not seen the number of applications or cash being submitted. For the fiscal year of2019-2020, the department accepted total of$2,017,209.06 in cash, which is approximately 25% ofthe total receipts for the department ($7,961,278.16). The following table shows the total receipts by payment type for each budget unit: Planning and Building Response to 2020 Grand Jury Page6 Cash Check Cr Card Other $ 62,421.88 $ 620,364.66 $ 20,002.54 262 $ 227,596.10 $1,275,914.99 $232, 185. 96 268 $ 562,451.37 $ 682,786.32 $ 68,513.14 269 $ 279,455.93 $ 135,000.32 $ 24,761.71 277 $ 26,860.78 $1,212, 752. 76 $ 40,973.83 282 $ 25,848.00 $ 397,809.95 $ 20,244.00 888 $ 449,808.00 $ 704,917.81 $ 17,400.00 VIO $ 382,767.00 $ 402,974.65 $ 87,466.46 . $2,017,209.06 $5,432,521.46 . $511,547.64 This table shows the department receives an average of $8,000 in cash per day. Cash payments are not made every day. Somedays there is very little or no cash, and sometimes a larger payment is made in cash. The protocols outlined above in response to F-1 provides both accountability for the employees and protection of employees by transporting cash in pairs. This procedure also allows the staff to transport cash when needed so that we are not storing large amounts of cash. The department does not store large volumes of cash. There is more we could do but have not done to provide increased security in the building and several ideas were explored. Security cameras at the front counter were considered but not employed due to Human Resources labor relations concerns for employee monitoring. Physical changes such as glass barriers at the front counter and a "panic button" door locking mechanism were not implemented in the past years due to intention to relocate the Department from its current location. As that plan has now been delayed, those previous modifications and additional physical security features can be explored again. The Grand Jury expressed concern with the safety ofthe public and staff in the department yet in releasing a document that reported that the department stores large amounts of cash and disclosed how this cash is transported to the bank actually put the department staff in danger by presenting the image that the staff often transports large volumes of cash to the bank. In response to the release of the Grand Jury report disclosing this misinformat1on, the department changed its security protocols to include how deposits are transported to the bank in order to reduce the now increased risk to staff due to what I must believe were unintended consequences ofpublishing our Department security protocols.

Lack oftransparent accounting for cannabis-related revenues (permit fees, Trust Fund monies, fines) makes it difficult to determine the economic impact oflegalization ofthe cannabis industry on the County. (R-2, 3) Disagree. It is difficult to determine what this finding means. There seems little relationship between the departments accounting practices and the economic impact of the cannabis industry on the county. As discussed above there is accountability and transparency in the way funds are accepted, processed and expended within all budget units ofthe Planning and Building Department. Planning and Building Response to 2020 Grand Jury Page7 ·

The cumbersome permitting process defeats the purpose oflegalization. It creates the incentive for cultivators to remain in the illicit market. Disagree. This an unfounded editorial opinion at best. It is not addressed nor supported in the body of this report, and there are no recommended actions germane to this finding. Its sole purpose appears to be to support an exaggerated title in pursuit of a conclusion the Grand Jury hoped to find but could not. This does not demonstrate the objectivity and fact-based conclusions one would expect from a civil grand jury operating in accordance with its charter. This finding further seems to cater to the segment ofthe cannabis industry that is opposed to any regulation. There is a cultural war within the cannabis industry between those who have entered the legal marketplace and are derided for this, and those who refuse to enter the legal industry. In the responses above only some ofthe efforts taken to make sure Humboldt County cultivators are successful have been described. We could spend a great deal of time defending the process, but perhaps the response would be better focused on results. The following table shows the top three counties in terms of number ofstate license applications submitted. Humboldt County is number 2 in the number of license applications submitted to the State but is number 1 by a large margin of the number of licenses issued. Humboldt County growers lead the industry with approximately 30% ofthe licenses issued by the state. 2019 and 2020 Licensing Totals for top 3 Counties: County 2019 (Applications 2020 (Total 2019 Total Received): +2020) Applications Licensed with State Received): 1. Santa Barbara 1175 1225 88 (No 5 in State) 2. Humboldt 689 (No2 in State) 805 (No 2 in State) 792 (No 1 in State) (16% of state total (30% of state total applications) licenses) 3. Mendocino 560 646 555 (No 2 in State) State Total 4340 4930 2635

The Planning and Building Department website is not user-friendly. Applicants are disadvantaged by lack ofaccess to clear instructions and guides. Some information also appears to be out ofdate. (R-1) Partially agree. The Planning and Building Department does not have a website specific to the department. Humboldt County has a website and the Planning and Building Department has designated pages within the main county website. The Planning and Building Department acknowledges that information on the department website pages is not updated regularly. Additionally, the department could provide enhanced information services to assist the public in understanding some aspects ofthe permit process. In Planning and Building Response to 2020 Grand Jury our experience, the majority of new applicants prefer face to face interactions regarding the specifics of the projects they are considering. To meet these varied needs in a more tailored way, the Department provides a Cannabis Planner on Duty (CPOD) at no cost to those considering a camrnbis related project. The CPOD is available Monday through Friday from 8:30 to 5:00 in our Eureka office and another at our Redway office at least one day per week. Each is available via phone, email, and at the public counter to assist with those considering applications as well as any agents supporting their considerations. The CPOD contact infonnation including the Cannabis Services email and frequently asked questions are included in the web-based infonnation. The Plam1ing and Building Department is working to enhance the services available to the public through the Accela permitting software system. This included the ability to remotely research the status of a project, upload documents and information directly to a project and submit new permit applications online. Once these enhancements are implemented, the Planning and Building Department can provide links and information to the public on the depaiiment website pages. RECOMMENDATIONS